A Kremlin panel urged prosecutors on Wednesday to annul the second conviction of fallen tycoon and Vladimir Putin critic Mikhail Khodorkovsky that extended his stay in jail through to 2016.

The now-disbanded Yukos oil company founder and his business partner Platon Lebedev were initially arrested in 2003 and found guilty of tax evasion when Putin was still president.

A second conviction last year on money laundering and embezzlement charges came just a year before their scheduled release and followed a warning from Putin, who now serves as prime minister, that a "thief must be in prison".

An advisory Kremlin rights panel said in a 300-page report commissioned by President Dmitry Medvedev in February that the second conviction violated Russian criminal law.

"The expert panel in its majority ruled that the Russian criminal code does not provide the grounds for viewing what they did as a crime," panel member Tamara Morshchakova was quoted as saying by Russian news agencies.

Khodorkovsky was found guilty of embezzling almost all of his own company's oil profits over a set period. Yukos was responsible for one-fifth of Russia's oil production in the years preceding its breakup by the state.

Khodorkovsky was jailed while ranked as Russia's richest man and was considered a dangerous political opponent to Putin who openly funded opposition parties and promoted his own energy interests that ran counter to those of state firms.

Putin said last week that he would be prepared to review a request for clemency by Khodorkovsky should he be elected to his third term as president in March elections.

Khodorkovsky has always maintained his innocence on both sets of charges and refused to plead guilty even if it means staying in prison.